Victim Characteristics of Investment Fraud

28 Pages Posted: 2 Oct 2018 Last revised: 3 Feb 2019

See all articles by Steven James Lee

Steven James Lee

Cal Poly Pomona

Benjamin F. Cummings

The American College of Financial Services

Jason Martin

Swarthmore College

Date Written: January 31, 2019


Investment fraud constitutes a major problem in the United States. While several studies have investigated various aspects of fraud, none have analyzed victim characteristics of investment fraud. This study posits five fraud languages that, when used by fraudsters, shut down the perceived need to conduct due diligence in their victims: perceived success; air of familiarity; claim to authority; noble pursuits; and framed authenticity. Using the Health and Retirement Study data from 2008, 2010, and 2012, the authors found that respondents who were male, were better educated, were single, younger, and possessed greater net worth disproportionately reported being defrauded in the past five years. Additionally, deploying principal component analysis (PCA) revealed that respondents who made responsible spending decisions, specifically those who were more likely to spend wealth over their entire lives as opposed to spending greater percentages of wealth on short-term needs, were less likely to report fraud. This study lays the groundwork for linking the five fraud languages to various factors such as financial literacy and dependency arising from questions within the HRS data set. Implications for such findings include protecting individuals near retirement from fraud and spreading public awareness about the importance of due diligence in the investment decision process.

Keywords: fraud, investment fraud, behavioral finance, victim characteristics, fraud languages

JEL Classification: G40

Suggested Citation

Lee, Steven and Cummings, Benjamin F. and Martin, Jason, Victim Characteristics of Investment Fraud (January 31, 2019). 2019 Academic Research Colloquium for Financial Planning and Related Disciplines, Available at SSRN: or

Steven Lee (Contact Author)

Cal Poly Pomona ( email )

Finance, Real Estate and Law Department
3801 W. Temple Avenue
Pomona, CA 91768
United States

Benjamin F. Cummings

The American College of Financial Services ( email )

270 S. Bryn Mawr Avenue
Bryn Mawr, PA 19010
United States

Jason Martin

Swarthmore College

500 College Ave
Swarthmore, PA 19081
United States

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